ABSTRACT

'Volcker Rule': Proposals to Limit 'Speculative' Proprietary Trading by Banks [June 22, 2010]   [open pdf - 246KB]

"In 1933, during the first 100 days of President Franklin D. Roosevelt's New Deal, the Securities Act of 1933 and the Glass-Steagall Act (GSA) were enacted, setting up a pervasive regulatory scheme for the public offering of securities and generally prohibiting commercial banks from underwriting and dealing in those securities. Banks are subject to heavy, expensive prudential regulation, while the regulation of securities firms is predominately built around registration, disclosure of risk, and the prevention and prosecution of insider trading and other forms of fraud. While there are two distinct regulatory systems, the distinguishing lines between the traditional activities engaged in by commercial and investment banks became increasingly difficult to discern as a result of competition, financial innovation, and technological advances in combination with permissive agency and judicial interpretation. One of the benefits of being a bank, and thus being subject to more extensive regulation, is access to what is referred to as the 'federal safety net,' which includes the Federal Deposit Insurance Corporation's (FDIC's) deposit insurance, the Federal Reserve's discount window lending facility, and the Federal Reserve's payment system. In the wake of the Great Recession of 2008, there have been calls to reexamine the activities that should be permissible for commercial banks in light of the fact that they receive governmental benefits through access to the federal safety net. Some have called for the reenactment of the provisions of the GSA that imposed affiliation restrictions between banks and securities firms, which were repealed by the Gramm-Leach-Bliley Act (GLBA) in 1999."

Report Number:
CRS Report for Congress, R41298
Author:
Publisher:
Date:
2010-06-22
Series:
Copyright:
Public Domain
Retrieved From:
U.S. Department of State, Foreign Press Center: http://www.fpc.state.gov/
Format:
pdf
Media Type:
application/pdf
URL:
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